The Value Equation

Core Components of Strategic HR

Executives Are Using Outsourcing to Improve Their Workforce  Performance and Effectiveness through all of the following Strategic HR programs and initiatives: 

1. Building and Maintaining Leaders >>“In the end, all business operations can be reduced to three words: people, product and profits. Unless you’ve got a good team, you can’t do much with the other two.” – Jack Welch. 
   
2. Enabling Profitability Drivers >> “Creating operating scale in the business to drive growth is the #1 driver of wealth.” –Garry Meier 
   
3. Building a ‘Perform’ Culture >> “In 2009 and beyond, wealth will be created for ‘perform businesses’ that are the most productive and cost efficient, promote and excel at change management, and focus on being REALLY good at a few things i.e. customer satisfaction.” - Garry Meier
   
4. Facilitating “Integrated Talent Management” >> “50 percent of companies are now implementing some form of “Talent Management; and the value-add is 26 percent higher revenue-per-employee than companies with no integrated processes.” –Bersin research analyst group.
   
5. Team Building >> “The team with the best players wins. Giving people self-confidence is by far the most important thing that I can do. Because then they will act.” – Jack Welch
   
6. Strategic Workforce Management (Planning, measuring, benchmarking) >> “If you pick the right people and give them the opportunity to spread their wings and put compensation as a carrier behind it you almost don't have to manage them.” – Jack Welch.

The Value of Strategic HR

‘Ineffective people = ineffective businesses’; it is that simple, and that complex because every business depends on its’ people to effectively perform as a team to achieve its organizational goals and objectives.

Unfortunately, “Traditional HR” (which has historically been administratively focused) provides little value to financial goals and does not manage the people issues that keep executives up at night.  

The move to adopt human capital best practices, also commonly referred to as ‘Strategic HR Capabilities” or implement a “High Performance Workforce” has been occurring at the Fortune 500 level since the mid 90’s. 

The recent financial hardships, changes in laws and regulations, and a fundamental shift in small business economics has mandated that top performing companies invest in their workforce like never before. 

With the growing demands and challenges placed on small business executives, those that adopt best practices, utilize effective external help/support and business partners, and rethink their current approach to HR have a chance to preserve and create wealth. 

Numerous studies by “Great Places to Work Institute”, consulting firms like McKinsey and Towers Wyatt, and business thought-leaders like Jack Welch and Warren Buffet all agree: the investment and alignment of a company’s workforce directly impacts profitability and financial success. 

Need further proof of the value of Strategic HR?  Here is the Business Case for Strategic HR:

1. Time Savings and Focus for Executives: Within small businesses, organizational leaders are themselves often responsible for HR (i.e. the workforce’s engagement, productivity, and development), an area where they typically have limited training and experience.

2. Workforce Scale:

• Highly engaged employees are on average 26% more productive, have lower turnover, and greater shareholder return (see findings in Watson Wyatt’s 2008/2009 WorkUSA Report). 
• Talent Management Practices power engaged companies to achieve higher profit per employee by nearly 40% (McKinsey).
• “Imagine if your employees enjoyed coming to work. Great Places to Work have outperformed the market 2:1”  (Great Place to Work Institute)
• “Nearly 40 percent had no formal measures to gauge the impact of their HR and training efforts on the performance of their top three workforces, and nearly another 40 percent said they have only limited measures.” Accenture ‘High Performance Workforce Summary’ 2006.
• “HR equals constant upgrading.  100% transparency into performance. Take care of the best and move up the averages, much like a GM/ player personnel director in sports. The only way to win is to have a great team.” “Enormous chance [for businesses] to change and reset, but takes a culture of innovation. The one thing you have to do in a time like this is communicate like hell… so your people know every move that is going on. You don’t go in and just slash positions and they don’t know why. HR defines a company in bad times.” Jack Welch @ 2009 SHRM Conference New Orleans, LA.

3. Risk Mitigation: 1 in 4 privately held companies has been sued by an employee The average litigation and settlement costs are nearly $190.000. (Chub Insurance).

4. Cost Efficiencies: The average company saves 20% to 60% per year (HRO Association).

Did you know than only a third of companies tailor their people policies and development to align with their workforces needs?

The primary objective of Strategic HR is to align the Workforce Capabilities to the Business Objectives of the organization. This includes: creating a strong pipeline of leaders that will drive business growth, installing workplace programs that ensure engaged, motivated, and productive and employees as well as implementing scale and risk operating measures.

Evaluation and Selection Criteria for HR Technology

“For years, we were able to practice HR without needing the numbers.  Those times have changed, and data deficiency has given the HR professional an Achilles’ heel.”  (Source: Talent Management Magazine article: “All Aboard the Numbers Train”)

HR Systems Drive Efficiency & Improve Profit-per-Employee

“50 percent of companies [enteprises] are now implementing some form of ‘Talent Management’ and the value-add is 26 percent higher revenue-per-employee than companies with no integrated processes.” –Bersin research analyst group.

The equation is simple, if profit-per-employee is increased through higher productivity and employee engagement and/or by eliminating waste and administration then the overall profit of your organization will increase.

While having an HR system becomes a requirement at a certain size (based on company complexity and their people needs) how do you choose from the hundreds of quality solution providers?  

The criteria system for evaluating HR Technology Systems that we start with is as follows (a full list of features and functionality should be compared in terms of the priority/need for your organization):

A major trend that has started to spread across industries is the need for many organizations to adopt full “Integrated Talent Management.”  This holistic talent management platform is typically implemented in modules:

I. Core HR: Payroll, Benefits, ESS & MSS (Portals), Administration, Compensation, T&A, etc.

II. Employee Record

III. Training and Development: Competencies, Assessment, LMS, Performance Management, Workforce Management, etc.

IV. Talent Acquisition: ATS, Onboarding, Assessment, Selection, Screening, Workforce Planning, Job Board integration, etc.

V. Enterprise Functionality: Workflow, Document Management, Testing and Surveys, Communication, CRM, Project Management, Social Networks, Web 2.0, etc..  For some organizations, it makes a lot of sense to take the CRM or ERP plunge in tandem with an HR investment in order to have true integration with core business processes. 

For a list of vendors checkout the following resources:

• http://www.humanresourceexperts.com/
• http://hrchitect.friscowebsites.com/Partners/vendorpartners
• http://www.bersin.com/Lib/Rs/
• http://www.hrtechconference.com/expo_attendee.html
• http://www.comparehris.com/

The most important result of systems implementation is that HR becomes strategic and enables the organization to focus.  Contact Ephor for a full list of features and functions by module component listed above.

The Adoption of HR Technology by Small Businesses

What percentage of small businesses have implemented an HR system?  (i.e. an  HRIS/HRMS (Human Resources Information/Management System), Talent Acquisition (Recruiting / ATS – applicant tracking system) or Talent   Management System?)

A little online research reveals the adoption rates of HR technology at mid-market and enterprise levels as follows:

• Enterprise level adoption rates have been forecast as high as 85% (although less than half are in an “intermediate” or “advanced” stage of talent management utilization).
  • “Talent Management Software (@ the Enterprise level) purchases were flat to slightly up in Q1, and we believe the market grew slightly (3-5% in Q2)”. 
  • “Only 14% of (Enterprise) buyers use their ERP or HRMS vendor for talent management.” Bersin Blog.
• Numerous “experts” (read: online bloggers) have speculated that approximately 60% of the mid-market has partially adopted an HR system.
• Thirty-five (35%) percent of companies with 2,500 employees  have adopted a module (www.unitedBIT.com) of HR technology.

Having worked with more than two-dozen HRO, HR consulting, and HR technology firms over the last few years I can verify first hand that less than 1 in 10 small businesses have implemented a ‘holistic Talent Management’ system.  Ephor’s primary research reveals that the  majority of small businesses have outsourced payroll and benefits, a third have outsourced recruiting at least partially, and firms handle the remaining components of ‘Talent Management’ with internal resources or not at all!

Some discussion related to the topic of why there has been lackluster adoption of HR technology by small businesses recently took place at  HRmarketer Blogpost on the state of small business HR technology adoption with Steve Boese (professor of Human Resources Technology at the Rochester Institute of Technology).  Steve attributes the lack of adoption to the following:

1. the perception that technology offerings are very expensive,
2. the perception that HR technology is complex, and
3. the fact that for companies with limited resources adopting a new technology can be a daunting task (i.e. people are unaware of what is available).

But rather than debate the adoption rates of small business perhaps a more interesting question is at what inflection point, on average, do growing and high potential organizations adopt HR systems?

Depends on the industry, access to capital (i.e. if they are venture funded the implementation of a ‘holistic talent management platform’ occurs much earlier: as little as $1M in annual revenues), and growth rates, but on average the starting point occurs around 300 to 600 employees and the tipping point depends on the complexity of the business and sophistication of the management team. I would further assert that less than 5% of the small business marketplace is getting the needed value from their “payroll/benefits plus” system highlighting a tremendous gap and opportunity.

A few notable small business players that service the less than 100 employee market to watch include:

Zoho (http://people.zoho.com/jsp/iamlogin.jsp), Taleo (www.taleo.com), PCRecruiter (http://www.pcrecruiter.net/home.htm), People-Trak (http://www.people-trak.com/), and Vana Consulting (implementation firm for Zoho)(http://www.vanaconsulting.com/). 

I am sure that I am leaving someone out?

The Business Case for HR Technology

The following is a brief list of the benefits of Talent Management / HRMS (human resource management system) – i.e. the Business Case for HR Technology:

1. Reduce administration costs and resources via automation (Cost Savings)
2. Tracking, measurement, benchmarking, reporting and Business Intelligence (Make Informed Decisions)
3. Risk Management including compliance & regulatory requirements (Peace-of-Mind)
4. Hold managers, leaders, teams, employees, etc. accountable, while improving employee performance (Accountability and Performance)
5. Engage the workforce (Employee Engagement)
6. Flexible/Adaptable workforce for both responding to change and planning for future needs (Organizational Efficiencies from Strategic HR)

Hiring ‘A’ Players: Take Action Now to Upgrade Your Team

In your town right at this exact moment in time, a comment is being made by a business owner saying: “We are not hiring right now.”   

My reply, “But you should be because ‘A’ Players are readily available.” 

The actions and messages companies send their employees in this economy of uncertainty, restructurings, pay freezes and salary reductions dictates how top performers in your organization perceive your company. 

It may be true that employees cannot easily change jobs today in this economic environment, but how your workforce is treated means whether they are fully engaged (engaged employees are on average 25% more productive according to numerous research studies) or whether your employees will jump ship at the first opportunity 6 or 9 months down the road. 

Now is THE opportune time to hire ‘A’ players.   Many firms are distressed and have not done any of the following to retain their top performers:

• Adequately communicated with employees;
• Implemented motivation, employee engagement, and retention programs;
• Changed rewards and incentives to reflect this new economy.

The economy of 2009 and 2010 will be led by the organizations that innovate, adapt to a “Perform” economy, and embrace change.  A Players are needed. 

The following is a brief description of the ‘A Player’ concept according to Brad Smart, author of TopGrading: 

The cornerstone of Brad Smart's TopGrading recruiting and evaluation system is ranking candidates and employees through letter grades. "A" and "B" players are assets; "C" players will kill off your company. "A Players” are the top 10% of talent available in the marketplace. Defining an "A" player sounds simple, but it is not. The person's skills, motivations, and personality traits  will vary depending on the job description. (Your "C" player in one job could be your "A" player in another.) While all must have rock-solid integrity and a sterling job-performance track record, not all will have to be team leaders or long-term visionaries, though that surely helps. They all must be quick studies.

Technorati Tags: A player,a players,recruiting,workforce planning,hiring,retention,perform economy,topgrading

Why You Need Strategic Workforce Planning

Whether your organization is hiring this year or not, knowing the current skill and capability gaps of your workforce as well as the market availability of talent (and the cost-to-acquire!) is critical for any executive to make informed management decisions.

When to Utilize Strategic Workforce Planning?
Do any of these scenarios apply to you?

1. Your organization lacks sufficient number of Leaders and/or ‘A’ Players;
2. Even with rising unemployment, or perhaps because of it, it has become even more difficult to find quality talent as job boards are plagued with bottom feeders;
3. Currently in the process of evaluating whether to promote employees, supervisors, or leaders; or
4. Currently evaluating a new product line or business venture.
   

Strategic workforce planning ensures employers have the right people in the right place at the right time and at the right price.

At its core, strategic workforce planning consists of three steps: 

1. Projecting future demand;
2. Assessing your internal supply (breadth and depth of people skills and capabilities), and lastly;
3. Developing your strategy to fill the gaps.

Benefits of Strategic Workforce Planning include:

1. Understand labor/employment and hiring patterns and trends
2. Position your firm to gain a people competitive advantage during a slower economy
3. Assess your people skill and capability deficiency against your financial objectives
4. Forecast hiring dates, costs, and resources
5. Make informed business decisions such as whether it is more cost effective to hire part-time contractors, outsource an activity, or add full-time salaried employees
6. Assess human-capital needs and risks against the opportunity landscape/ROI
7. Hire more than your share of ‘A’ Players
8. Improve career development and “promote-from-within” policies
9. Reduce long-term hiring and retention costs

Want more resources on Strategic Workforce Planning?  Try these thought-leaders:

• Aruspex > Helping Companies Plan and Build Their Best Future Workforce 
• Strategic Workforce Planning Blog
• InfoHRM > Global leader in workforce planning, analytics, and reporting
• Vemo > Strategic Workforce Planning
• Achilles Group > Strategic Workforce Planning for small business
• An Outline of a Strategic Workforce Plan
• TEDS > Talent Management Solution
• Solutions Advisor: Bersin
  

Technorati Tags: strategic workforce planning,workforce best practices,management best practices

 

2009 Small and Medium Best Places to Work Award Winners

Each year, the Great Place to Work^® Institute produces Best Companies to Work for lists in the United States including FORTUNE 100 Best Companies to Work For^® in America.

What Makes a Great Place to Work^®?

At the heart of the institute’s definition of a great place to work is a place where employees "trust the people they work for, have pride in what they do, and enjoy the people they work with." A great workplace is measured by the quality of the three, interconnected relationships that exist within any organization:

1. The relationship between employees and management.
2. The relationship between employees and their jobs/company.
3. The relationship between employees and other employees.

Enhancing the workplace delivers results including:

• Receive more qualified job applications (get more than your fair share of ‘A’ Players).
• Experience a lower level of turnover.
• Experience reductions in health care costs.
• Enjoy higher levels of customer satisfaction and customer loyalty.
• Foster greater innovation, creativity and risk taking.
• Benefit from higher productivity and profitability.

Best Companies Outperform Their Peers

When you invest in your people, you invest in your organization's success. A comprehensive review by the Department of Labor of more than 100 studies that examined the link between progressive people practices and improved bottom line results concluded that:

• There is a positive relationship between training, motivating, and empowering employees and improvements in productivity, employee satisfaction and financial performance.
• When developing and implementing a people strategy with progressive people practices, a combination of practices is more effective than a single practice
• The impact of progressive people practices is greater over the long term (3 plus years), indicating that practices need to be integrated into the work environment to provide benefits

· Fortune "100 Best" versus Stock Market 1998-2008

Any company can be a Great Place to Work^®!  For more information on Best Places to Work checkout:

• 2009 Top 25 Small Business Award Winners
  
• Best Places to Work Articles and Case Studies
  
• Best Small & Medium Companies to Work for in America Nomination and Application Process

Technorati Tags: Human Capital Best Practices,Strategic HR,Effective human resources management,great place to work,award,best place to work,best places to work

Top Ten Workforce Trends for Emerging Enterprises

#10: Prevalence of Advisors - Historically, "strategic advisors" consisted of accountants, CPAs, and lawyers; today however top-performing companies are turning to self-created advisory boards consisting of industry leaders, partners, and/or customers.  

#9: Outsourcing Adoption is Increasing.  Almost all companies outsource something; whether its payroll, marketing, sales, accounting, finance, or HR.   The Ephor Research Practice reports outsourcing adoption rates by function for employers with 25 to 2,000 employees: Human Resources 18%, Information Technology 26%, and 40% of all small businesses outsource some or all of accounting and finance.

#8: Run Human Resources like a Profit Center.  Anything that is measured can be improved.   Many organizations start with measuring basic HR measures (revenue and profit per employee, turnover rates, cost-per-hire, and employee engagement) and monitor quarter-by-quarter trends.   By shifting HR's focus from payroll and administration to organizational development and implementation of Human Capital best practices organizations become top performers.  

#7: Focus Performance Reviews on Forward Looking Goals, training, and career development.  HR experts and thought-leaders have written ad-museum about making performance reviews as motivational tool and not for discipline.

#6: Adopt Flexible Scheduling. 68 percent of firms utilize some type of alternative scheduling.  With the advent of conferencing and collaboration tools plus rising gas and transportation costs companies are embracing 9/80 and other flexible work schedules.

#5: Embrace Transparency. While stories of corporate greed plague the economy; many organizations have opted for more transparent reporting which drives accountability, engagement, communication, and connectiveness. 

#4: Improve Employee Productivity with training and tools. Download Employee Productivity Best Practices for Entrepreneurs.

#3: Invest in employee development and retention.   The average professional employee turnover costs an organization $50,000.00!   Read more about “Employee Management Best Practices.”

#2: Shift from reactive staffing mindset to proactive Workforce Planning. Workforce planning improves quality-of-hire and reduces recruiting costs.

#1: Create Workforce Scorecards – The path starts with creating transparent measurement and metrics.  Daily accountability at the front-line is a real problem that can be mitigated with effective management and measurement techniques.

We have found that companies that implement effective human capital best practices achieve the following:

A. Create scalable procedures (i.e. reduce labor and related workforce costs by 20 – 50%);

B. Develop more effective managers and leaders;

C. Improve workforce productivity; and

D. Mitigate workforce related risks and compliance issues.

 

Technorati Tags: workforce best practices,human capital trends,workforce trends,human capital best practices